By Pooja J. Punjabi, Chartered Accountant
13.
Jotun India Private Limited vs. PSL Limited
Company Application N. 572 of 2017 [Bom HC]
Date of Order: 5th January, 2018
Insolvency and Bankruptcy Code, 2016 – NCLT
continues to retain its jurisdiction for petition filed by any creditor even
where the winding-up petition has already been admitted by the jurisdictional
High Court.
FACTS
On 10.03.2015, J Co supplied goods to P Co
worth Rs. 7.25 crores. Upon failure of P Co to pay the stipulated amount, it
filed a company petition under sections 433 and 435 of the Companies Act, 1956
seeking winding up of P Co.
On 19.06.2015, J Co filed a petition with
Board of Industrial and Financial Reconstruction (“BIFR”) under Sick Industrial
Companies (Special Provisions) Act, 1985 (“SICA”) which was admitted on
09.03.2017 although Official Liquidator was not appointed.
Insolvency and Bankruptcy Code, 2016 (“IBC”)
was enacted which resulted in repeal of SICA and all matters pending before
BIFR stood abated. However, companies were granted a window of 180 days to file
fresh applications before National Company Law Tribunal (“NCLT”) under the IBC
regime. Thus, on 29.05.2017, J Co filed an application before the NCLT within
the 180 day period granted under the IBC.
Subsequently, P Co filed an application
before the Hon’ble Bombay High Court for appointment of provisional liquidator.
An order was passed by the High Court on 19.07.2017, restraining the NCLT from
continuing with the application filed before it. Present application was filed by J Co
requesting the High Court to recall the order dated 19.07.2017 which imposed a
stay on the IBC proceedings.
Parties and Intervenors made extensive
arguments before the High Court.
HELD
The matter which arose before the High Court
was whether it had the jurisdiction to grant a stay on the proceedings filed by
a Corporate Debtor before the NCLT, although a previously instituted
Company Petition had been admitted, but
where a Provisional Liquidator had not been appointed.
The High Court observed that the most
fundamental distinction between the provisions of Companies Act and IBC is that
winding up of companies is for the Court to decide and under IBC there is a
paradigm shift in as much as it displaces the management and Insolvency
Resolution Professional is appointed and Creditors committee is left to decide
the fate of the company.
High Court placed reliance on the Supreme
Court in the case of Madura Coats Limited [2016] 7 SCC 603 where it was held
that even during the regime of SICA, SICA was to have primacy over the
provisions of Companies Act, 1956. It was held that since SICA is repealed and
replaced by IBC, the provisions of IBC should prevail over the provisions of
the Companies Act, 2013.
J Co had filed a reference which was pending
before the BIFR when SICA was not repealed.
It had also made an application to NCLT within the stipulated period of
180 days. Further, placing reliance on Supreme Court’s decision in the case of
Bank of New York Mellon [2017] 5 SCC 1, it was held that in terms of section
252 of the IBC even in the case of a company where a winding up order has been
passed, it is open to such a company, whose reference was deemed to be pending
with BIFR, to seek remedies under IBC before NCLT. Also, there was no express
provision under Companies Act which stated that a post notice winding up
petition which is governed by the Companies Act, 1956 against the same company
(and which is retained by the Company Court), cannot be entertained by NCLT and
if entertained will be nullified.
It was held that admission of the winding up
petition by the jurisdictional High Court would not mean that NCLT either loses
jurisdiction or cannot exercise jurisdiction in case of a petition which is
filed by another creditor. It was observed that provisions of section 64(2) of
IBC indicated that the legislature did not intend that the Company Court would
have the power to injunct proceedings before NCLT.
High Court held that a new petition filed
under the IBC could still apply to the post notice winding up cases that
continue to be governed by the Companies Act, 1956. The mere fact that post
notice winding up proceedings are to be “dealt with” in accordance with the
provisions of the Companies Act, 1956 does not bar the applicability of the
provisions of IBC in general to proceedings validly instituted under IBC, nor
does it mean that such proceeding can be suspended.
The High Court went on to state that NCLT is
not a court subordinate to the High Court and hence as prohibited by the
provisions of section 41 (b) of the Specific Relief Act, 1963 no injunction
could be granted by the High Court against a corporate debtor from institution
of proceedings in NCLT.
Reading section 141 of the Code of Civil
Procedure, 1908, along with Rule 9 of the Companies (Court) Rules, 1959 it was
held that High Court had sufficient power to recall any order previously passed
by it.
The order dated 19.07.2017 was thus recalled
by the High Court.
14.
Ind-Swift Ltd., In re
[2018] 89 taxmann.com 149 (NCLT-Chd)
Date of Order: 8th December, 2017
Section 73 of Companies Act, 2013 – Company
facing liquidity problems approached NCLT for extension of time in repaying its
fixed deposits – Extension was denied in view of the fact that Company Law
Board had already granted a huge extension in 2013 – There was no reason to
grant any further extension.
FACTS
I Co was incorporated on 06.06.1986 and was
listed on the stock exchange. I Co had been accepting deposits from the public
since the year 2002 and regularly and punctually paid back the fixed deposits
up to 28.02.2013. In the financial year ending on 31.03.2013, it started facing
liquidity problems and incurred losses. It filed a petition before the Company
Law Board (“the Board”) pleading for extension of time in repayment of deposits
which was sanctioned by the Board on 30.09.2013 with certain directions. It was
also clarified that non-compliance with order of the Board would result in
penalty u/s. 58A (10) and section 274 (1) (g) of Companies Act, 1956 (“1956
Act”).
As a result of ongoing financial and
liquidity crunch, I Co filed a fresh application with the NCLT on 27.09.2016
seeking further extension of time for repayment of deposits u/s. 74 of the
Companies Act, 2013 (“2013 Act”) read with Rule 11, 15 and 73 of the National
Company Law Tribunal Rules, 2016 read with section 58AA of 1956 Act.
I Co was directed to publish notice of the
hearing by advertisement in two newspapers which was duly complied by it. I Co
pointed out that out of the total number of 5575 depositors, the company
received 45 objections seeking speedy payment of their deposits. Registrar Of
Companies (“ROC”) jointly with Regional Director filed a statement before the
NCLT that it regularly received complaints against the company for repayment of
fixed deposits, all of which were forwarded to the company for necessary
action.
HELD
I Co filed a fresh scheme of repayment
detailing the manner in which payments would be made to the deposit holders.
The Tribunal noted that I Co had not made any payment to the fixed deposit
holders since the institution of the application.
Tribunal held that once the company had
sought the sanction of the scheme from the Board by bringing its financial
position to its notice at the relevant time in the year 2013 and got the relief
of huge extension, there was no reason to accept the plea for further extension.
Tribunal noted that it in coming to a decision of whether or not to grant an
extension it would not only have to consider the financial position of the
company but also safeguard the interest of the fixed deposit holders. The
legislature had laid down severe punishment in case of failure by the company
to make the payments to the deposit holders within the extended time and this
provision will have to be implemented in letter and spirit.
In view of the extension already granted by
the Board and lack of sincere efforts on part of I Co to repay the deposits,
Tribunal rejected the application seeking further grant of extension in
repayment of fixed deposits. I Co was directed to abide by the terms of order
of the Board and any non-compliance would entail penalties as listed out in the
2013 Act.
15.
Sree Gayathri Leisure India (P.) Ltd. vs. ROC
[2018] 89 taxmann.com 34 (NCLT – Hyd.)
Date of Order: 29th December, 2017
Section 252 of Companies Act, 2013 –
Company was carrying out regular business and there was a delay in filing
statutory returns – Name of company which was struck-off for the non-filing was
ordered to be restored upon payment of additional fees.
FACTS
S Co was a private company incorporated on
29.04.2013 in the state of Andhra Pradesh. The main objects of the Company were
to act as commission agent for referring and enrolling members into any
resorts, clubs, hotels, family parks and other related activities etc. S
Co did not file annual accounts and annual returns for the Financial Years 2013-2014
to 2015-2016. It was the claim of S Co that it had been carrying out normal
business activities in the said period and the non-filing was wholly
inadvertent. ROC vide notice dated 21.07.2017 read with grounds mentioned in
public notice dated 05.05.2017 struck off the name of S Co.
S Co contended that company had been
regularly carrying out its business and was under the impression that all the
returns are being regularly filed. While filing of pending return on MCA portal
for pending period did the company realise that its name has been struck off.
It was pleaded that action of striking off of the Company would adversely
affect not only the company but its customers and various stake holders etc
alike. S Co submitted that it was ready to comply by filing annual returns in
question within the stipulated time as granted by the Tribunal, along with
required fees.
HELD
Tribunal examined the provisions of section
248 to 252 of the Companies Act, 2013 which deal with striking off the name of
the company. It was observed that before taking final action to strike off a
company u/s. 248(5), the ROC, is under duty to follow section 248, which
mandates the ROC to satisfy itself that sufficient provisions have been made
for realization of all amounts due to the company and for payment or discharge
of its liabilities and obligations etc. In the case of S Co, company had
ongoing business and there were people who depended on the company.
Considering the interest of company, its
employees and public employment, the Tribunal allowed the application of S Co
and directed the Registrar to restore its name in the Register of Companies
subject to filing of all the pending returns and payment of prescribed
additional fees. The Tribunal also imposed a cost of Rs. 30,000. _
